NOMSA NKANA, Lusaka
ZAMBIA Chamber of Small and Medium Business Associations (ZCSMBA) has called on European Investment Bank (EIB) Fund to allow micro, small and medium enterprises (MSMEs) to use their acquired equipment as collateral.
ZCSMBA chief executive officer Moto Ng’ambi said in an interview that this is because most MSMEs do not have ready collateral required by financial institutions.
Mr Ng’ambi said although some members have traditional land, which has no title deeds, the land cannot be used as collateral.
“For instance, if one of our members would like to buy specialised equipment, they should be allowed to use that same equipment as collateral. This will bring growth to MSMEs,” he said.
Mr Ng’ambi has also called for reduction of interest rates within the range of four to five percent to reduce the default rate on repayments.
He said despite the current decrease on rates, ZCSMBA is calling for further reduction and a longer loan repayment period for MSMEs.
“You see, MSMEs will still get loans even when interest rates are high, in the hope that they will pay back after conducting their businesses.
“However, reality sets in when they see that the projections are not always correct and they become indebted and fail to pay,” he said.
Mr Ng’ambi said reduced interest rates and a flexible repayment plan will create confidence in the MSMEs to repay loans and avoid defaulting.